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Todd Harrison Muses On The Rise of the East and the Downgrade of the West
From Todd Harrison of Minyanville
The Rise of the East and the Downgrade of the West
“All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.” --Sun Tzu
Earnings season has arrived and the eyes of the world are on corporate America as they share their fare on the state of affairs.
After a tenuous second quarter stretch -- one that could have been entirely worse given the sovereign situation -- the market slapped on a brave face for reporting season, rallying 7% since the third quarter began and inching within a kitten’s whisker of the flat line.
As analysts sharpen their #2’s and investors wait with bated breath, the other side of the world stirred this week when China’s leading credit agency stripped America, Britain, Germany, and France of their AAA ratings, accusing Anglo-Saxon competitors of ideological bias in favor of the west, according to the Telegraph UK.
So what, you say? Could this be a one-off rant? Au contraire Mon frére, Dominique Strauss-Kahn, chief of the IMF, validated the view by offering, “Asia’s time has come.”
This is but one ingredient in an increasingly complex global stew that’s been brewing for quite some time. Old school Minyans will hearken back to the days of yore, when Professor John Succo offered the following foresight in 2004. (See: Subterfuge)
And I quote:
The Federal Reserve has assured the US public that our debt is not too high and we should not be concerned that so much of it is owned by foreigners.
These words are inherently disingenuous not because there is certainty they are not telling the truth, but because there is at least a chance that they are wrong and the consequences of this error are immense. And they know that there is at least a chance that they are wrong.
In order for us to be assured and not concerned, we would have to be certain that the Chinese will always behave in the best interests of the US. I contend that you have to at least consider that they will not. I contend that the Chinese will always act in their best interests and not necessarily ours.
Right now they are acting in our best interest by using their dollars from trade to buy our treasuries to keep our interest rates low, but that is only because right now their interests align with ours. If they ever deviate, I think we can be certain that they will go their own path.
But what if it is even worse and they actually have a plan for their benefit at the detriment of ours? This is at least a possibility, the consequences of which are significant. Our government has left us exposed to this possibility.
This isn’t some Jack Bauer conspiracy where Ben Bernanke was abducted and tortured for seven months until such time he broke. No, it’s entirely more sinister than that; we’ve been willing participants in feeding the beast of global imbalances for years on end, hoping against hope they’ll magically reverse.
They haven’t and they won’t, although gauging the timing of the cumulative comeuppance remains the single biggest unknown for the markets at large. (See: The Eye of the Financial Storm)
The bottom line is this: as it stands, it’s in nobody’s economic interest to shake the foundation of our interconnected market machination. With upwards of $1 quadrillion dollars of derivatives tying the world together -- an estimate once reported by the Bank of International Settlements (nobody knows the actual number, which is scary in itself) -- we’re all in this together.
Sovereign nations would have extricated themselves from this tangled web long ago if they were able to do so. Given cross-border counter-party risk and the interdependence of trade relations, this dynamic is growing increasingly tenuous as the enormity of the financial condition magnifies in size and scope.
The financial market construct has evolved into a chess match of political posturing. “Free trade” and “free markets” are quickly becoming antiquated ideologies in the newfound global balance of power. Isolationism and protectionism are the “other side” of globalization. The question remains whether we’ll need to endure the former before arriving at the latter. (See: The War on Capitalism)
One thing seems to be crystallizing as an unfortunate truth unfolds. If and when true globalization arrives, it will likely manifest from the outside in. The US, once the global leader of capitalism, is simply a pawn in the much bigger race towards economic prowess.
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Reminds me of the rise of the Soviet Union in the 1970's and then Japan in the 1980's. Both were going to capture the planet but then fell off a cliff. China will too.
But not before the US does.
That's completely wrong. China depends on US imports, and their housing bubble is worse than ours. And their reserves are in DOLLARS. Think about that.
I had a chance review a range of different manufacturing facilities in China back in the day when off-shoring first started getting ramped up. The first thing I did when I returned stateside was to write a private correspondence to some other clients advising them to cross Mexico off their lists - China was were the action was.
I will never forget the absolute Dickensian nightmare that is inland China; truly a horror. If there is one memory that really captures the moment, it was the group of people operating manual punch presses which had been shipped over from some ancient plant in the mid-West. The ceiling was low - around 6' - with a dirt floor and a small coal fireplace in the corner. The workers wore shorts, and were sweating in the heat/haze, pushing in doG knows what onto the presses & punching them out.
If anyone thinks we have a prayer against these guys, may I quote a famous line from Apocalypse Now?
Charlie didn't get much USO. He was dug in too deep or moving too fast. His idea of great R&R was cold rice and a little rat meat. He had only two ways home: death, or victory.
aisablues had a good ZH contributor post up yesterday on China's downgrading of the rest of the civilized world. A good read for those who missed it.
http://www.zerohedge.com/article/us-stripped-aaa-credit-ratingby-china
Act 1: TBTF bankers buy bonds from the Treasury, run next door to the Fed's discount window and post them as collateral to get more cash to buy even more bonds--then do it all over again. They can make 20% or more return on their initial investment from the interest stream (depending on how levered up they are) and the Federal Reserve is now holding all those bonds as collateral. This action creates a seemingly infinite market for US bonds. But, the Fed now cannot raise interest rates in this environment, because the margin call would cause a fatal cash crunch for one or more of the TBTFs. You could say the Fed is already monetizing the US debt just by accepting gobs of it as collateral, but this is being disguised by the thin veneer of “promise to repay” by the TBTF banks. This arrangement might go on for a long time, unless of course, there is some crisis of confidence regarding US bonds.
Act 2: Enter China and their downgrade of US debt.
@JLee
I am not sure if you could be any further from correct...
US economy ABSOLUTELY depends on China's cheap imports. If they grow the balls to decouple they can easily start to consume more of what they produce. There are plenty of other nations out there producing and underconsuming that could take up the slack of 300 million americans.
Yes, their reserves are in dollars, that is exactly how we will have massive inflation. All those dollars start coming home and entering our economy. They will be buying and bidding up our prices making goods unafordable for US consumers. Who cares if they lose out to currency devaluation at that time, they already have taken over our productive capacity! Whatever they are able to spend those dollars on is just a bonus at that point.
And in no way is their housing bubble as bad as ours.. The % increase in prices, maybe, but the overall effects of that bubble blowing out is not even comparible to our situation. We bought homes on high leverage, them, not so much. 50% down payment for a second mortgage, while we were begging people to buy second homes with next to nothing down.
You paint a nasty picture which is as close to the truth as a non-member of the communist party can get.
Or China can re-tool their quality level a little bit (they sell schlock to the US consumer as that group has zero buying power after 100 years of inflation theft), and sell to more affluent countries as you said.
The Empire moves East. NY is Toast. HK, Darth Vader cometh.
US economy ABSOLUTELY depends on China's cheap imports
No, no, no. We have food and shelter here. Don't need PC's, TV's, iPhones to survive. Buyer just goes into cave for a while till the shit storm passes. A seller with no buyers goes out of business. China is dead meat.
I agree CC
Those that fled the countryside for jobs in the city will return to the countryside and eat tree bark, rice and bugs when out of work.
Americans depend on our gov for weekly paychecks when out of work.
Actually many will continue to live in the streets like the unemployed do in the US. There's better food to scavenge in the cities. And more resources for the agile to acquire from the unwary.
I think China will too, in large part due to its one-child policy. But that's not to say that the US is capable of remaining top dog forever.
I'd place a long-term bet on India, though it's not without its own questions.
That's changing. Their government is actually encouraging productive families to have more children.
Doomed to failure.
Don't confuse growth with prosperity. To do so is long term fatal.
Sunny
John,
You'd lose your money in India.
India is capitalism's EPIC FAIL...
Please see:
http://aadivaahan.wordpress.com/2010/07/13/whither-india/
ORI
http://aadivaahan.wordpress.com
US bet the farm on fin services and we know how that turned out. Either you believe China cedes the financial services complex to the west to own the low level manufacturing complex or they don;t. Indication about getting into the jumbo jet business and moving up the value chain (defense, etc.) suggest they will neither accede to being Germany nor dereg the fin services business per WTO agreements.
The idea theat you can achieve "true" globalization = the euro works (gold m2m arguments h/t FOFOA notwithstanding). Even Brzezinski doesn't believe globalization/governance is achievable, yet. Harrison is defining globalization through a US prism.
he may want to consider another perspective:
"The BRIC countries (Brazil, Russia, India and China) got together in the Brazilian capital, Brasilia, on Thursday with a bang. After meeting Chinese President Hu Jintao, and once again condemning an "asymmetric, dysfunctional globalization", Brazilian President Luiz Inacio Lula da Silva was at his ebullient best: "A new global economic geography has been born." Well, not quite. Not yet."
...
"The world anyway will never become "flat" - this is a silly neo-liberal, simplistic fantasy. A new global political consensus would have to be formulated by the United Nations - but not a UN dominated by the US; ideally this should be under a reformed UN, with an expanded and fully representative UN Security Council. One thing is certain; entrenched elites in both the US and Europe (which for all practical purposes is now a midget in the global arena) will fight the dilution of their power tooth and nail. "
http://www.atimes.com/atimes/Central_Asia/LD17Ag01.html
t/s also said tactics without strategy is the surest way to defeat; SDR is yet another tactic
Neither of those examples followed free market ideology. China has one of the lowest expense rates as a % of GDP of any nation in the world. Contrast this with the leviathan that was the politburo, and with the Keynesian nightmare of Japanese bureaucracy.
remember ben - dont worry, its "contained"
Sic Transit Gloria Mundi (thus passes the glory of the world).
US in a downward spiral.
... not with a bang but a whimper.
I hate to say this "but this time it's different". This is not just one country in the East on the rise but many: China, India, Taiwan, South Korea, Singapore, Indonesia, Malaysia, etc. Per capita GDP is on the rise in the East and declining in the West. They aren't as dependent on us (the West) as consumers and they cannot be coerced into pursuing ruinous economic policies that Japan did in the 90s. They also learnt a thing or two from Japan as well. That I am sure.
Maybe it is not a teeter-totter? Maybe East and West can both collapse?
hedgeless,
you may a point.
people of all stripes tend to improve and get fully disgusted with Politicians and governments.
there is a potent sub-current to what is happening econimically that we are yet to understand...
An excellent article in Politico today, about the growing class divide which has accelerated over the last couple of decades, all over the world, including and especially in China, India, and other economic 'powerhouses'. An excerpt:
http://www.politico.com/news/stories/0710/39675.html
"Perhaps nothing demonstrates this more clearly than the unrest at the Foxconn Technology Group [in China]. Workers produce cool products — for companies like Apple, Dell and Nintendo — but under such oppressive conditions that some have been driven to suicide.
"Mounting protests about Foxconn’s employment practices, and a recent rash of strikes in China’s Honda plants, reveal the disruptive potential of this class conflict.
"Even as China’s corporations and government become richer, inequality is widening. Indeed, over the past 20 years, China has shifted from an income-distribution pattern like that of Sweden or Germany to one closer to Argentina’s or Mexico’s. By 2006, China’s level of inequality was greater than that of the United States or India.
"Not surprisingly, class anger has reached alarming proportions. Almost 96 percent of respondents, according to one recent survey, agreed that they “resent the rich.”
"China’s class divides may be extreme, but similar patterns can be found almost everywhere. From India to Mexico, economic growth has led to a striking increase in the percentage of urbanites living in slum conditions.
"In 1971, for example, slum dwellers accounted for one in six Mumbaikars. Today, they are an absolute majority.
"This almost guarantees greater class conflict in the future, even as India’s economy booms.
"“The boom that is happening is giving more to the wealthy,” said R.N. Sharma of Mumbai’s Tata Institute of Social Sciences. “This is the ‘shining India’ people talk about. But the other part of it is very shocking — all the families where there is not even food security.We must ask: ‘The “shining India” is for whom?’”
"This growing inequality in the developing world is already shaping global politics. The failure of the Copenhagen climate change conference can be largely ascribed to the unwillingness of China, India, Brazil and other developing countries to sacrifice wealth creation opportunities for ecological reasons.
"Like their counterparts in New Delhi and Beijing, politicians in wealthier countries also face class conflict.
"In Britain, for example, even a massive expansion of the welfare state has done little to stop the U.K. from becoming the most unequal among the advanced European democracies...A similar phenomenon appears in Australia...What is not clear is whether conservative parties can abandon their often slavish devotion to big corporate interests to take advantage of these new dynamics."
Renfield,
I suspect we all have mental images of what the regular posters "look" like in our heads. Since you posted your new avatar, I can't even look anymore. Would you please do this older person a favor and post a more pleasing image for an avatar? That face doesn't look anything like my image of you, unless you're a vampire. :>)
Or am I being sexist?
LOL! Cogni, for you, anything. I will look around for something less scary since I don't want you having bad dreams. :-)
You will need to have patience though because I have terrible luck finding avatars that: a) suit my 'Renfield' nick (eg, crazy, scary, doomed, not terribly credible, and yet also female) and b) show up on the tiny blog pic! I'll take a walk thru my pix file today and see what I can turn up. I have a feeling it's gonna be back to Google Image search again.
(And credit where it's due: both MsCreant and RockyRaccoon sent me some beautiful avatars. Trouble is, they were gorgeous beautiful and sexy and didn't look insane at all! Far too easy on the eye! So it's a bit of a fine line, you see.)
PS: I'm not a vampire, at least not since I was 16 and did the whole crosses-on-the-face, pale makeup, bats-in-the-ears thing...now I look so very, very square. Even my old nosering piercing grew in years, years ago!
Renfield, how's this one?
http://a.imageshack.us/img262/4134/mparksiconhd0.jpg
Very Nice.
I know you were offered this some time ago. I happen to love it but maybe that's because I'm a dirty older man. :>)
http://www.garyreed.net/Renfield/RenfieldArt5.jpg
Pardon me Renfield for butting in.
May be an image like this reflects your character more realistically:
(eg, crazy, scary, doomed, not terribly credible,and yet also female)
http://upload.wikimedia.org/wikipedia/commons/4/4f/Mohini_in_Belur_templ...
Well.... maybe in my mind.
These avatar suggestions are all three, very beautiful. Funny how sometimes you come across artistic sense on a financial blog. I'm just going to say a quick thank you to you guys so as not to derail a very productive thread further with my frivolous little avatar woes, but I will experiment with them, and they have given me ideas for other searches as well.
Thanx to you as well Paper Crusher for sending me to Google for Mohini. The meaning behind the avatar is certainly what I'm trying to get at.
So interesting, I wrote the same thing about India on my blog yesterday, referenced above.
ORI
http://aadivaahan.wordpress.com
ORIndian:
For centuries, I think, the 'west' has been in the lead in some form or another, although perhaps that's only true since the beginning of the British empire. (I regard the 20th century as the end of the British empire, through the United States of America, and not as a separate 'American empire'.)
We are all casting about for who to look to next. I thought maybe it was China; and now I have to admit I just have no idea. Maybe it will be a sort of an uncomfortable 'alliance' among China, India, Russia, the Middle East...? And that would surely not last.
I miss the simplicity of the 20th century.
The author makes some very good points.
One I found particularly chilling for the west in general is that "true" globalization, warts and all, will visit with a ferocious suddenness, and most of the west has gone too soft to resist.
Maybe the missing second world is a mix of the smash down of the first world and a bloat up of the third.
What an ugly picture, eh?
ORI
http://aadivaahan.wordpress.com
that's the way the dutch settlement scheme works;-)
http://www.enterprisecorruption.com/?page_id=5175
all these talking suits and experts - for the life of them, cant see any affect of obama policies on jobs
I tend to think that if the East, particularly China is ideally suited to dominate the world they should have gotten around to it by now as they've certainly had plenty of advantages over the centuries. Obviously in the last 500 years or so Euro-centric states/culture and their greater emphasis on the individual and free enterprise have pretty much carried the day. When China eventually did become ripe for a shift toward Western culture it settled on Marxism of all things. What the hell?
What China has been demonstrably better at than the West, or at least on a bigger scale and over longer periods of time, is a high-functioning, civil service bureaucracy with a a positive meritocratic/corruption ratio. If this is the to be the key to future human civilizational greatness (and I hope it isn't) then yeah, China will eventually be calling the shots.
My money would be on India or the Indian diaspora though, at least over China.
Friends, I'd like to toss something out for comment vis-a-vis the growing class divide (great post by the way) - my thought is that an enormous part of the blame lies with the government's debasement of our currency over last 40 or so years, and the fact that while certain items/expenditures have become commoditized and thus kept "affordable", others i.e. housing, education, have increased tremendously, and the middle class cannot keep up (not to mention the lower classes). I'd be most interested in hearing others' thoughts on this.
"Obviously in the last 500 years or so Euro-centric states/culture and their greater emphasis on the individual and free enterprise have pretty much carried the day."
Good point, but over the past couple of decades, the west (esp. the US) has put far less emphasis and value on individuality, creativity, and free enterprise. Childhood creativity has been supplanted by television and video games; individuality is shunned (you're either with me or against me); and free enterprise has morphed into plutocracy. Until the oligarchs are willing to cede some of their control and power, this will continue. The argument could be made that we are morphing into a modern version of feudalism.
China is part of the global credit system which is lead by the US consumer via the US dollar. This global credit system peaked in 2007 when the US consumer peaked. China is not going to own everything just like Japan was not going to own everything. They have peaked and will collapse and are collapsing with everyone else.
They are the modern day United States from the 1920s, unfortunately the system peaked on the US and we collapsed, at that time it was lead by the UK.
Which is why their stock markets actually look just as bad if not worse than the West.
http://stockcharts.com/def/servlet/SC.pnf?chart=$SSEC,PLTAWANRBO[PA][D][F1!3!!!2!20]&pref=G
Decoupling is the lie they keep using over and over, 30-40 million factory Chinamen figured out the lie in late 2008 when they got laid off at the factories in the cities and started heading back to the rural country.
I know the west is having troubles at the moment, but I would not be so quick to write off the US. If our leaders get their heads out of their arses then we could reorganize into a productive society again. The US could easily sustain itself and compete if it was willing. This is looking unlikely at the moment though.
These "experts" often point out the good things of the east, but often fail to mention the negative aspects. The posts ZH readers are putting up reflect serious issues.
The first step is that our leaders have to act more like altruistic statesmen and less like self-aggrandizing political hacks.
Irrelevant what decisions are made the system expands, peaks, unable to expand, collapses and liquidates.
It's a global system, and it will globally collapse and liquidate of the unfunded.
bingo, beat me to it.
Why not though? Do you seriously think we can inflate the credit bubble? We may ultimately bring back jobs, manufacturing, and balance the trade deficit and budget deficit, but it will be at a level/standard of living far below the peak of the credit bubble.
Also, color me skeptical, but I do not believe even the tea party can reconnect joe six pack with the feeling of political power. Our keepers must understand that they do not have all the answers... but of course, how do we elect such people given they are self nominating? Good luck. Literally, the entire system, economic, political, state, local, federal, you name it, needs to be whittled down and begun anew. I'm afraid the choices you would like for your fellow citizens and handlers to make will instead be made for them... we have a core competency in ignoring problems. They are proactively impotent. This is just a mugging of the dead guy on the street before the officials get there to declare him dead.
MachoMan,
I think many folks (even in leadership) fear proposals that will partially or universally lower our standards of living. No one wants to propose it, as it is a guarantee of losing an election bid. That said, just how much lower will our aggregate standard of living need to drop to facilitate a reasonable reset to viability?
Yes, of course they fear it. It's why the simple math catches up to us eventually.
As far as the equilibrium level, your guess is as good as mine. But, I venture to say it is substantially lower given the absolute and total panic over contemplating it, by all persons (both those in and out of the know). In other words, the decrease is substantial enough for us to embark on a spending campaign the likes of which the world has never seen. Or alternatively, the fear over the potential consequences was sufficient enough for the powers that be to fuck the living hell out of our mangled guts and keep some bones as souvenirs. Either way, I suspect bad. Maybe this just boils down to an argument from intimidation, but we don't have much to go by...
What’s happening is the globalists took America’s growth and put it in other countries; that’s what is damaging our jobs and economy.
IMF”s Managing Director Dominique Strauss-Kahn said recently, “While the IMF and the labor movement might have different views on different topics, our goals are ultimately the same -- standing against narrow domestic interests, against nationalism, against war. And standing for better living standards for all, and for peace.”
That was his conclusion in The Priority of Growth and Jobs—The IMF’s Dialogue With the Unions written July 6 after the closing of the IMF 2nd World Congress of the International Trade Union Confederation (ITUC) in Vancouver.
What he and the globalists are really saying is we need to stop America (the US still has roughly 25% of the world economy) so we can manage the world’s resources and labor for our own personal power and wealth
When Strauss-Kahn states he opposes nationalism the reason is, he opposes individual freedom. Example: The reason Iran is considered a problem, she’s trying to be independent, trying to be her own sovereign, just as Sam Adams tried.
When he says we to want override narrow domestic interests —what that is—we oppose cultural freedoms.
And when he says we are for peace—the translation for that is world government.
And when he says we are opposed to war—the translation for that means we favor countries that will surrender their sovereignty. If attacked you need to surrender—then, there won’t be a war. Example: All you need to do, Iran, is to lay down your arms and destroy all your nuclear facilities, and all the battle groups that surround you with Israel’s finger on the trigger, will leave and you can come in, including Israel—but not until we occupy and take over your government with some moderate Iranian living in Britain and bring him back to be the president while we can find someone to serve as oil minister. But the point is, Iran, there won’t be a war; there won’t be any killings.
That’s our buddy Strauss-kahn.
Quote from iMFdirect blog.
JR
This reply is a Flag as Gold.
To cancel and one-up that perplexing flag on your comment.
The debt ridden US consumer is quickly becoming redundant. With their continued drop in spending power coupled with the US becoming a 2nd rate exporter, the viable exporters of the world are looking to other viable exporters to trade with.
The US needs to decide if it wants to export items people want at prices people want to pay. We have aircraft, weapons systems, technical know how and food that people want. Some of these products will be unsellable in the future as others enter the fray.
As China and others move up the manufacturing food chain, American labor rates are going to have to drop to stay competitive. This will weaken the American consumers further.
The US is running out of "acceptable" buyers with cash who can buy our expensive goods. Not trading with or selling aircraft, weapons systems, refining equipment..etc to countries like Iran will be proven to be folly.
We are driving many countries with cash to spend and resources to sell into the arms of the Chinese and Indians. The American public is clueless as usual. People who do not understand this are plain stupid.
"The key is to ignore the Thomas Friedmanesque rhetoric the media is flooded with and get down to some hard numbers. The easiest hard number is this: Because the U.S. is roughly 25 percent of the world economy, a truly borderless world would imply that imports and exports would each make up 75 percent of our economy, since our purchase and sale transactions would be distributed around the world. This would entail a total trade level (imports plus exports) of 150 percent of GDP. Instead, our total trade level is 29 percent: imports are 17 percent and exports 12 percent. So our economy is nowhere near borderless. Furthermore, as our trade is almost certainly destined to be balanced by import contraction, rather than an export boom, in the next few years, our trade level is almost certainly poised to go down, not up. So unless the U.S. can somehow magically find a way to keep sucking in $300 to $700 billion a year in imports it doesn’t pay for with exports, America in a few years will be importing significantly less and will be a less globalized economy. A truly unified world economy would also mean that rates of interest and profit would have to be equal everywhere–because if they weren’t, the differences would be arbitraged away by the financial markets. But this is nowhere near being the case: Interest rates and corporate profits vary widely around the world. Economists James Anderson and Eric van Wincoop have calculated that the average cost of international trade (ignoring tariffs) is the equivalent of a 170 percent tariff. Even between adjacent and similar nations like the U.S. and Canada, national borders still count: Canadian economist John McCallum has documented that trade between Canadian provinces is on average 20 times as large as the corresponding trade between Canadian provinces and American states. And much of international trade is interregional anyway, not global, being centered on European, North American, and East Asian blocs; this is true for just under 50 percent of both agriculture and manufactured goods. In reality, the world economy remains what it has been for a very long time: a thin crust of genuinely global economy (more visible than its true size due to its concentration in media, finance, technology, and luxury goods) over a network of regionally-linked national economies, over vast sectors of every economy that are not internationally traded at all (70 percent of the U.S. economy, for example). On present trends, it will remain roughly this way for the rest of our lives. The world economy in the early 21st century is not even remotely borderless. "-- Ian Fletcher, The Myth of the Global Economy July 7, 2010
http://industry-news.org/2010/07/07/ian-fletcher-the-myth-of-the-global-economy/
The US buys boatloads of Chinese made goods and resells them around the world. Currency exchange anomalies, tariffs, taxes and the fact that China is many times the low cost supplier of goods makes this possible.
Most people are clueless to the variety of goods available in China and how easy it is to purchase them. Anyone who believes China only sells junk is truly clueless. You can buy any grade of product you want. A product can be anything from a stamped metal bracket up to a finished good. Buying from China is not much harder than buying from a domestic supplier. In fact domestic suppliers can be a big PITA to deal with.
Well put. And here's the domestic-side angle. It took a systems analyst to do it, John Lilburne (pen name) in “Free Trade 25 Years Later: A $6.6 Trillion Deficit.” but I considered it also very well put—why Ben Bernanke frantically pulls out all financial stops to prime the U.S. credit pump in order to rejuvenate profligate spending. It’s to recycle and sustain the powerful profits of transnational corporations made from goods produced by cheap foreign labor and unloaded to sell without hindrance in the U.S.—a nation deliberately stripped of its manufacturing base and now the major dumping ground of the global economy
Last August Lilburne described it as the USA’s 1984 turning point:
“The ruling elite brought about a structural change in capitalism which undermines freedom. They call it a global economy but it resembles a global plantation. In 1984 the cumulative trade deficit of the U.S. was near zero. Today, 25 years later, it has reached $6.6 trillion. …The U.S. is the major dumping ground of the global economy which is far more complex that Madoff’s Ponzi scheme...
"The Keynesian approach relies on deficit spending to sustain profitable corporate operations from one business cycle to another. The transnational corporations since 1984 have been sustained by a new, more powerful profit engine than deficit spending. The first precondition for the new engine was the dismantling of a large part of the U.S. manufacturing base so that production could be outsourced to China, India, NAFTA etc. where very cheap labor was readily available. The second precondition was permission to dump the foreign produced goods in the U.S. without hindrance. The third precondition was compliance by the banking system to recycle the huge profits as new loans.
"The U.S. government and banking system have a revolving door to the transnational corporations and all work as a team. Key personnel receive a share of the profits as bonuses, bribes, donations or huge salaries. In any crisis they play a blame game.
"In 2007 the trade deficit was $815 billion while the budget deficit was only $163 billion. How was it possible for such a large amount of foreign-produced goods to be sold in the U.S.? Obviously credit had to be extended to consumers by the bankers in order that the transnational capitalists could receive dollars. Dumping goods into the U.S. increases supply but the goods cannot be sold without deflation unless demand is also increased by credit expansion. Supply and demand must be equal.
"Deficit spending is a way to extend endless credit to the government which pledges never to default …
"The stimuli provide billions in federal deficit spending in attempts to recycle the slightly-diminished annual transnational profits made from dumping. There is no way such profits can be loaned out for mortgages or consumer loans in the depression-like economy …"
“Asia’s time has come.”
Merci ..... for the breaking news Dominique
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